Thanks for explaining. Still think there is a factor down to the decreasing number of new entrants, but not the whole shebang.
It really would be good to have volume as well as value information. So much easier to try and figure things out if we could see variations in the unit value of loans too.
Under that scenario everyone else with a house would need to be not selling, as any non-loon sales at the then current price would be bringing the valuation figure back towards reality.
You also need the people excluded to be permanently out of the market, because if they do save up to the new (much higher) 25% deposit, they then take on much more debt when they actually enter, and that brings debt up to balance rather than prices down.
That's exactly the scenario I'm proposing.
Collective lunacy grips the house buying and selling market, and those who already have houses trade for other houses (obviously not via direct swaps, but managed transitions via helpful banking institutions) at ever more loony paper values.
The ever-shrinking proportion of new entrants who manage to save 25% of the loon price-point load up on debt, but there are so few of them that the total value of debt as a proportion of total house value drops away from its prior level.
And yes, more and more people are permanently excluded from the market because the new loon-based entry point is insurmountably higher than their ability to hoard spare cash.
is it leads to the next link in the chain of “who you are selling your house to"- either you sell your house to someone (and at the end of the chain someone needs to load up on debt).
But… What if there isn’t an end? As in, new entrants drop out of the market, crazy loon A and crazy loon B both have a moment and swap their $150k houses for $1.5m on paper. The new entrants would have to pay the crazy loon prices, but that might still result in a net drop in the total debt if the number of entrants has dropped steeply enough.
ETA: and the volume would stay high if the loon-swapping continued at a feverish pace, even while potential new entrants backed away slowly with fear in their eyes.
Thing that has been bugging me about this discussion, which I think presents an alternate hypothesis for the magic money gap.
There seems to have been an underlying assumption by a lot of commenters that those buying houses have houses. Which is probably true, if you’re over a certain age, debt is needed by those buying a house worth more than the one they have.
But if we remember that debt is also needed by those that don’t have a house yet, then… The gap could be explained by the decreased debt load due to the decrease in new entrants into the market. That is, the “gap” is a reflection of the lockout of the younger population from the mental housing market.
What have I missed?
but in reality it is somewhere between 0 and 4 billion extra houses needed to stablise demand. And because of the unknowns that is a pretty wide error range.
So… we can build 4 billion houses in Epsom, right? They just need to be... (grabs fag packet) ... twenty four thousand stories high. Too late to adjust the auckland plan?
No Robin Hobb/Megan Lindholm? And you call yourself SF/F readers :P
ETA: Also how amazing was the return to fitz this year?! So amazing.
I accidentally caught some of the show in the car the other day and they were featuring brass band music. Brass band music! Who listens to that anymore? Seriously. Are RNZ really that far out of touch with their audience?
This is precisely the reason I enjoy listening to radio active in the weekends so much - you never know what crazy ass music is going to turn up. Weekdays not so much, too much talking and too many ads for nga tonga sound & vision.
Treeson, even. On the verge of the metro-siders and footpads having a brush-up with the highwaymen.
he people who will exploit the information are not the sort to tell you what they’ve found, however.
Depends on the incentives. It works for some people.